As I posted yesterday, I got a chance to check out the machine that Shanen used for the Financial Analysts Meeting demo. I confirmed that it was just what I suspected: An audio gain issue.

If you watch the video clip on MSN Video you can see in the speech user interface that the microphone "volume" is very high. It pushes up into the red frequently while Shanen is speaking to the computer. That's caused by the fact that the audio sub-system wasn't respecting the audio gain settings we've asked it to use.

This is a known bug in current builds, and has already been fixed by the audio team in their private builds in preparation for RTM.

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The problem in this demo was simply a matter of the audio sub-system not respecting that audio gain "request" that WSR made. So effectively, all the audio data that was being received by WSR was being clipped, and thus was incredibly distorted.